Buying off plan
SpeculationIn the period of 1997—2006, the price of housing in Spain had risen about 150% in nominal terms, equivalent to 100% growth in real terms. It is stated that from 2000 to 2009, 5 million new housing units had been added to the existing stock of 20 million. In 2008, the real estate market started to drop fast, and house prices decreased dramatically by 8% in that year. In the period of 2007-2013, Spanish house prices had fallen by 37%.
As in other countries that experienced bubbles, such as the US and Ireland, it began with a fondness for real estate speculation and a belief that property values would never cease to rise. All of these bubbles were like out of control fires fuelled by nothing other than greed. You could buy an apartment on the Mediterranean coast (or in a city) for £100,000 and sell it the next day for £150,000; by the end of the month it was worth £250,000. And meanwhile, the flat, purchased off-plan, was still being built. The last buyer still believed that prices would never stop spiraling upward. All this began in 1998, and the bubble finally burst in 2007. Nine years of speculative madness (10, in Japan) finally came to an end.
The return of buying for living
Purchasing a property “off plan” or in construction can be a very interesting investment option for the client looking for a prime home here in the Marbella area.
New property has always had a great attraction and the current market dynamics show this is still the case as many people looking to buy opt for a brand new home as opposed to a second hand one.
This then does create situations where availability in desirable new developments runs out fast. It can assist the buyer that the full purchase price is not immediately required and perhaps opens up many possibilities that might not have otherwise been considered.
The buyer can organise the management of his funds over a period of time in order to meet the stage payments that normally form part of an off plan investment.
In addition, due to the timescale for a property to be constructed, the buyer can consider a price level higher than he might have otherwise done, as he has time to structure his finances accordingly. Buying off plan does require a degree of imagination in order to visualise how the finished home and surroundings will look. Often the onsite representative of the constructor is able to provide promotional brochures with computer generated images and details of the quality specification that the property will have. There could be a scale model to assist in the selection of a property in a position that best suits the buyer. In most cases a show home is made available which removes many questions as to how the homes will look when finished. The buyer can then see, the level of finish, room distribution and installations,(the quality of flooring, bathrooms and kitchens etc.) When a client identifies an off plan property that he would like to buy, a reservation deposit of €6,000 is normally required. Once this deposit has been paid your agent will advise the developer that his client has paid a deposit in respect of the particular property in question. The property would then be removed from the market for this client.
Marbella Property Shop normally recommend to their clients that this deposit be paid to a Lawyer who will hold it on account until he has carried out certain vital checks on the buyers behalf. If for whatever reason the client is unable at this time to sit down with a Lawyer, we would accept the deposit, providing a signed receipt and pass this to the Lawyer immediately this is possible.
The Lawyer will then begin to carry out checks in order to confirm that the property in question is all above board, that all licenses and permissions are in place and that there are no legal or financial question marks which could mean that to proceed with the purchase would not be to the advantage of his client.
It would also be confirmed that any monies that are scheduled to be paid to the constructor during the building period, are protected by a guarantee. The Lawyer would explain fully all of the enquiries that he would need to make in the best interest of his client and would make them aware of any concerns that he might have.
Often, 30 days after the initial deposit has been paid a “Private Contract” is signed between the buyer and the constructor, this contract would have been prepared under the supervision of the buyers Lawyer. This contract would outline the full details, plans, specification and time of completion of the property. It would also outline the payment schedule and the times that they would be due. Details of the licenses and permissions would be included and the guarantee to protect monies paid over.
Depending upon the stage of construction reached when the buyer selects the property he wishes to buy, the typical time for the purchase to complete and the property is ready to move in to is 6 to 18 months.